The Buffalo Niagara job market was in rough shape before the coronavirus scare. Now it's only going to get worse.
It's only been in the last couple of weeks that it became clear just how sluggish the local job market was as 2019 turned into 2020. A pair of new federal job reports – the latest coming on Thursday – confirm what economists at the Federal Reserve Bank of New York predicted in December: The Buffalo Niagara region is losing jobs, and it has been since the beginning of last summer.
That's an alarming turnaround for the local economy because it occurred at a time when the national – and even New York State – economy continued to add jobs at a moderate pace. It calls into question the strength of the "Buffalo renaissance."
And it means the local job market is heading into the period of uncertainty caused by the coronavirus disruptions from a position of weakness – not strength.
It turns out the local slump began long before anyone ever heard of COVID-19, which is only now starting to cause worrisome disruptions to the Buffalo Niagara economy – disruptions that are getting more severe by the day, with international travel restrictions, shutdowns and event cancellations sending ripples throughout the region. Those are certain to cause even further hardships for restaurants, hotels and the region's entire tourism sector as the busy summer season approaches.
"It's definitely going to have a huge impact on the overall economy," said Timothy Glass, the state Labor Department's regional economist in Buffalo. "There's no way it can't."
What we don't know is how steep the decline in the coming months will be – or how long it will last.
Uncertainty is high
"The variables are very high and the uncertainty is very high," Glass said.
That's a bad thing, because it makes businesses and consumers hesitate to spend. And consumer spending accounts for about 70% of all economic activity.
Will the impact of coronavirus hamstring the local housing market, which has been one of the strongest segments of the local economy since the last recession ended? The crisis has caused mortgage rates to drop to new lows, but it also has sent stock prices plummeting, reducing consumer wealth and creating uneasiness. That's not a good backdrop to convince someone to make what, in many cases, will be the biggest purchase of their lives.
Will tourists stop coming to Niagara Falls, sapping the strength of the city's economic backbone?
Will businesses, which generally hate uncertainty, start retrenching? If they aren’t sure whether the coronavirus crisis will spur a recession, will they start hoarding cash and stop investing in new equipment? Will they scrap plans to hire workers because they don't know what lies ahead? Or even worse, will they cut back because their customers are doing the same?
And will the spread of COVID-19 be contained sufficiently?
That uncertainty is why the new job numbers were so worrisome. It would be one thing if we were entering the coronavirus period from a position of relative health. But we're not. Our job market already was showing signs that it was sick.
Just how sick? Consider this:
The Buffalo Niagara region added just 400 jobs throughout 2019. That was the fewest jobs the region has added in any year since 2010, when the region was shrugging off the last vestiges of the Great Recession.
The slump isn't anything new, either. There are two sets of job numbers that local economists watch, and both started flashing signs of a downturn in July. We're only learning about it now because the most timely set of statistics had been reporting modest job growth throughout 2019 – until a revised set of data was released on Thursday that told a more sobering story.
The other set of job data, which is more extensive and more reliable, is also much less timely and only runs through the end of September. When those figures were released late last month, they provided the first indication that a modest drop in hiring started in July and continued throughout the summer.
While job losses normally are a huge warning sign that a local economy is falling into a recession, there are other indicators that are more hopeful.
For one, the latest job losses are occurring at a time when unemployment remains low by local standards. The most recent unemployment rate is a little more than 4%, and that's a healthy sign, even if the rate winds up being revised upward a bit when new data comes out on Tuesday.
While hiring has slowed, the local workforce also has been shrinking because baby boomers are retiring and the region's stagnant population hasn't been sufficient to replace all of those departing workers. That's a big reason why it's been so hard for companies to find replacements for their retiring workers over the past few years.
That means the job losses aren't so much a symptom of a struggling local economy as it is a sign that the region doesn't have enough people of working age, said Julie Anna Golebiewski, a Canisius College economist.
"The labor force isn't growing to the same extent that payroll employment is growing," she said.
Said Glass, the state Labor Department’s regional economist: "Employment seems to be constrained by the lack of available workers. We still have very low unemployment. We still have businesses clamoring for workers."
The region's people problem – centered around a long-declining population base that only recently has stabilized – is one of the biggest challenges facing the local economy and the local job market.
"The Buffalo labor force has been falling, so the unemployment rate can stay low with little or no employment growth," said George Palumbo, a Canisius College economist.
Wages are rising, too. The average weekly wage for local workers, which factors in both wages and hours worked, grew by about 3% through the first nine months of last year and continued to rise during the summer as hiring slowed. That's about on par with the national change, even if annual wages are about $9,000 higher nationally than they are here.
"We're not falling any farther behind," Palumbo said.
But that was all before coronavirus. Now, all bets are off.